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Law > Companies: The Consequences of Incorporation > Flashcards

Companies: The Consequences of Incorporation Flashcards

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1
Q

Can sole traders create floating charges?

A

No

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2
Q

Can partnerships create floating charges?

A

No

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3
Q

Can LLPs create floating charges?

A

Yes

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4
Q

Define company

A

An artificial legal person

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5
Q

Do shareholders part-own the company or the company’s property or both?

A

Shareholders part-own the company; not the company’s property

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6
Q

Define the veil of incorporation

A

The fact that a company is a separate legal entity, which separates the legal identity of the company from that of its members, and also its liability from that of the members.

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7
Q

If a company fails, what is the liability of shareholders?

A
  1. Amount unpaid on their share capital OR

2. Any amount they have agreed to contribute (if limited by guarantee)

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8
Q

Define lifting the veil of incorporation

A

In certain circumstances the courts can look through the company to the identity of the shareholders.

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9
Q

Why would the courts lift the veil of incorporation?

A

To prevent inequitable results and expose the commercial reality of a situation

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10
Q

What is the usual result of lifting the veil?

A

The members and/or directors become personally liable for the company’s debts

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11
Q

What are examples of when the courts have been willing to lift the veil of incorporation?

A
  1. Where the courts feel the subsidiary may be regarded as an agent of the parent
  2. To reveal national identity in times of war
  3. When a business is registered as a company but is run as a partnership
  4. When a company has been registered for an improper purpose such as evading a legal obligation
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12
Q

On what occasions will statute intervene to lift the veil?

A
  1. A director who is disqualified participates in the management of a company
  2. Wrongful or fraudulent trading
  3. Public company trades without first obtaining a trading certificate
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13
Q

How many times can a company alter its status?

A

Once provided it amends its name and articles and notifies the registrar

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14
Q

Define public company

A

Must be registered as a public company under CA06

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15
Q

Define private company

A

Any company that is not a public company

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16
Q

What is the minimum number of members a public company can have?

A

One

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17
Q

What is the minimum number of members a private company can have?

A

One

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18
Q

What does a public company’s name end with?

A

Plc

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19
Q

What does a private company’s name end with?

A

Ltd

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20
Q

In order to trade, what is the minimum capital that must be allotted in shares of a public company?

A

£50,000, although this doesn’t need to be fully paid up: only 1/4 needs to be paid up, plus all of the premium

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21
Q

In order to trade, what is the minimum capital that must be allotted in shares of a private company?

A

No minimum

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22
Q

How may a public company raise capital?

A
  1. By advertising its securities as available for public subscription
  2. Can be listed on the Stock Exchange
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23
Q

Can a private company offer its shares to the public?

A

No

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24
Q

What is the minimum number of directors a public company can have?

A

Two

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25
Q

What is the minimum number of directors a private company can have?

A

One

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26
Q

When can a private company start trading?

A

Once it has obtained a trading certificate from the Registrar

27
Q

When can a public company start trading?

A

From date of incorporation

28
Q

Is a secretary required for a public company?

A

Yes and must be qualified

29
Q

Is a secretary required for a private company?

A

No and they don’t need to be qualified

30
Q

What is the deadline for a public company to file its accounts?

A

Within six months of end of accounting period

31
Q

What is the deadline for a private company to file its accounts?

A

With nine months of accounting period

32
Q

How often must a public company hold an AGM?

A

Each year

33
Q

How often must a private company hold an AGM?

A

No need

34
Q

Can a public company be excluded from pre-emption rights?

A

No

35
Q

Can a private company be excluded from pre-emption rights?

A

Yes

36
Q

Which documents must be submitted to the Registrar in order to form a company?

A
  1. Memorandum of association
  2. Application form
  3. Articles
  4. Statement of capital and initial shareholdings
  5. Statement of guarantee
  6. Statement of proposed officers
  7. Statement of compliance
  8. Registration fee
37
Q

What must the Registrar do with relation to documents received to form a company?

A
  1. Inspect them and ensure the CA06 requirements are fulfilled
  2. Issue a certificate of incorporation
38
Q

What must be included on a company’s memorandum of association?

A
  1. The signature of all subscribers

2. A statement from all subscribers stating that they wish to form a company and agree to become members

39
Q

What must be included on a company’s application form?

A
  1. Proposed name of the company
  2. Whether the members will have limited liability
  3. Whether the company is to be private or public
  4. Details of the registered office
  5. Intended address of the registered office
40
Q

What must the statement of capital and initial shareholdings include?

A
  1. The number of shares
  2. The aggregate nominal value of shares
  3. Details of each class of share
  4. How much has been paid up on each share
41
Q

What is the penalty to a company for trading before a trading certificate has been issued?

A
  1. The company and any officers are liable to a fine
  2. Criminal offence
  3. Contracts are still binding
  4. Directors are personally liable if the company defaults within 21 days of due date
  5. Ground for winding up if not obtained within one year
42
Q

Define an off-the-shelf company

A

One that has already been formed

43
Q

What are the advantages of buying off the shelf?

A
  1. Cheap and simple to buy
  2. Can trade immediately
  3. No problem of pre-incorporation contracts
44
Q

What are the disadvantages of buying off the shelf?

A
  1. The Articles of Association may be unsuitable
  2. Altering the articles will incur costs and may be inconvenient
  3. Need to change officers
45
Q

Define promoter

A

Anyone who makes business preparations for a company; a person who undertakes to form a company and takes the necessary steps to do so

46
Q

What are the fiduciary duties of a promoter?

A
  1. Exercise reasonable care and skill
  2. Disclose any interest in transactions with the company and not to make a secret profit
  3. Disclose any benefit acquired to an independent board and/or to the shareholders
47
Q

What are the remedies to the company if a promoter makes a secret profit?

A
  1. Rescind the contract (not where there has been unreasonable delay)
  2. Obtain damages by suing the promoter
  3. Recover profit
48
Q

Define pre-incorporation contract

A

A contract made by a person acting on behalf of an unformed company; the promoter is the person liable

49
Q

Can a company be bound by a contract that was made before it was formed?

A

No

50
Q

How can a company change its name?

A

By the shareholders passing a special resolution and notifying the Registrar

51
Q

When can the Secretary of State require a company to change its name and what are the deadlines?

A
  1. The name is the same as, or too alike, an existing registered name; 12 months
  2. The name gives so misleading an indication of the nature of the company’s activities as to cause public harm; no limit
  3. Misleading information or undertakings were given when applying for a name that required approval; 5 years
52
Q

Can a company name include the word ‘council’ without consent?

A

No

53
Q

Which registers must a company keep?

A
  1. Members
  2. Directors and company secretary
  3. People with significant control
  4. Charges
  5. Other documents
54
Q

Where must registers be kept?

A
  1. Members - where they are made up
  2. Directors - where they are made up
  3. People with significant control - company’s registered office
  4. Charges - company’s registered office
  5. Other documents - company’s registered office
55
Q

What details does the Registrar of Companies maintain?

A
  1. Certificate of incorporation
  2. The trading certificate
  3. Certificates of registration of charges
  4. The annual accounts
  5. Confirmation statement
  6. Special resolutions
  7. Changes of directors
56
Q

In a Limited Liability Company, who should hold insurance on assets?

A

The company itself

57
Q

Upon incorporation, must a company submit articles of association?

A

No

58
Q

Can somebody who is not a member rely on the contractual effect of the articles?

A

No

59
Q

Which sort of company must provide a directors’ remuneration report?

A

Only quoted companies

60
Q

Must not-for-profit organisations appoint an auditor?

A

No

61
Q

Must medium-sized companies appoint an auditor?

A

Yes

62
Q

Must insurance companies appoint an auditor?

A

Yes

63
Q

Must quoted companies appoint an auditor?

A

Yes

64
Q

Which companies are required to produce a directors’ remuneration report

A

quoted only

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